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The Finance Act 2020 amends some provisions of fourteen (14) legislations, however, the focus of this article shall be a brief discourse on the key amendments contained in the Finance Act 2020 of the following Acts:

  • Companies Income Tax Act;
  • Personal Income Tax Act;
  • Value Added Tax Act;
  • Capital Gains Tax Act;
  • Companies and Allied Matters Act;
  • Industrial Development (Income Tax Relief) Act;
  • Stamp Duties Act;
  • Tertiary Education Trust Fund (Establishment) Act.
  • Nigeria Export Processing Zones Act.
  • Customs and Excise Tariff ETC. (Consolidation) Act.



  1. Minimum tax: the applicable minimum tax for companies which was specified as 0.5% of the gross turnover less franked investment income by the Finance Act 2019, has been reduced to 0.25% for tax returns filed between January 1, 2020 and December 31, 2021.


  1. Tax deductions: cost of in kind donations made by companies to any fund set up by the Federal or State Government in respect of a pandemic, natural disaster or any exigency shall be considered allowable deductions for tax purposes provided the relevant documentations are presented to the relevant tax authority, and the WREN principles are demonstrated.


  1. Interests on agricultural loans: tax exemptions on interests on agricultural loans now limited to companies engaged in primary agricultural production provided the moratorium period is not less than 12 months and the interest is not more than the base lending rate at the time the loan was granted, refinanced or restructured.

Primary agricultural production includes the production of raw crops of all kinds, production of live animals and their direct produce, production of timber and other forestry products of all kinds, and the production of fish of all kinds excluding the intermediate or final processed products and any other manufactured or derivative of all of the products.

  1. Real estate investment companies: dividends and rental income of real estate investment companies are only exempted from tax if a minimum of 75% of the dividend and rental income is distributed, and such distribution is done within 12 months of the financial year in which such income was earned.


  1. Foreign companies: foreign companies determined to have derived income from Nigeria by virtue of having fixed base, an independent agent, performing turnkey contracts, artificial transactions or digital services with SEP in Nigeria are required to file audited accounts, tax computations, statement of profits, and company income tax self-assessment forms.

      6.Notice of Assessment: in addition to direct service, notice of assessments may now also be sent through courier, email or other electronic means.

       7.Limitation of Computation of Derived Profits of Foreign Company Engaging In Shipping or Air Transport

Computation of derived profits of foreign companies in the business of shipping or air transport is limited to carriage of passengers, mails, livestock or goods. Incomes derived from leasing, containers, non-freight operations and other incidental income liable to tax under section 9 of CITA is exempted from the computation of profits of foreign companies carrying on the business of shipping or air transport.

       8. Submission of Returns by Foreign Companies Deriving Profit From Nigeria.

Foreign Companies taxable in Nigeria under CITA are required to submit returns in the prescribed form attested by an independent qualified or certified accountant in Nigeria. Provided that foreign companies whose final tax on its income is withholding tax shall not be required to file returns for the year of assessment.

        9. Minimum 6 Years Maintenance of Company Books of Account.

All companies shall maintain in English, books or records of account in the prescribed form containing sufficient data on all transactions for a minimum period of 6 years after the year of assessment on which the income relates on penalty of the payment of N100,000:00k for the first month in which failure occurs and N50,000:00k for subsequent months in which failure continues.

      10. Development Or Acquisition of Software

Capital expenditure incurred in the development or acquisition of software or other such capital outlays on electronic applications are now included as a qualifying expenditure allowable under the CITA.


  1. Minimum tax: individuals who earn the National Minimum Wage or less from their employment are now exempted from paying personal income tax.
  2. Non-resident Individuals: tax liability for non-resident individuals, including Trustees and Executors has been further extended to include services, to a person resident in Nigeria, of a  technical, management, professional or consultancy nature, particularly where significant economic presence has been established. Withholding tax is however, the final tax in this instance.
  3. Assessable income for new trades: assessable income of new business will be calculated on actual year basis. That is, for the first 3 years of commencement of business, the income generated from the start of the business to the end of the accounting period of the relevant year will be considered for tax purposes.


  1. Taxable supplies: The Finance Act 2020 has further reinforced the FIRS’ clarifications through a Circular released April 29, 2020 on the scope of VATable goods and services. Therefore, VAT is chargeable on intangible and immoveable properties. Furthermore, VAT is applicable to services provided to and consumed by a person in Nigeria, irrespective of whether it was rendered or legally required to be rendered in Nigeria.

Also, incorporeal rights in tangible and immoveable properties are VATable where exploitation of the right is made by a person in Nigeria or the right is registered, assigned to, acquired by a person in Nigeria.

         2. Meaning of goods and service: goods are now defined to mean both moveable and immoveable properties except land and building, money or securities, while services are now specifically defined as rights over intangible or incorporeal properties excluding interest in land or building, money or securities.

        3. VAT exemption: commercial aircrafts, airline transportation tickets sold by commercial airlines, rental and lease of agricultural equipment are now exempted from VAT.



Levy on electronic money transfer: stamp duties on electronic money transfer of sum from Ten Thousand Naira (N10, 000) above is now replaced with Electronic Money Transfer Levy. The levy is a one-off fee at Fifty Naira (N50), and the modalities for its collection and remittance will be prescribed by the Minister of Finance at a later date.


Compensation for loss of employment: compensations paid to an employee for loss of employment is now taxable if the sum exceeds Ten Million Naira (N10, 000, 000). This tax is to be deducted at source by the employer according to the PAYE regulations and remitted to the relevant State Internal Revenue Service.



Pioneer status for primary agricultural production: small and medium sized companies involved in primary agricultural production may now enjoy pioneer for the first 4 years of operation and an additional 2 years upon application.

Small companies in this regard means companies whose gross turnover is Twenty-Five Million Naira(N25, 000, 000) or less, while medium sized companies are those whose gross turnover is greater than Twenty-Five Million Naira (N25, 000, 000) but less than One Hundred Million Naira (N100, 000, 000).



Exemption from education tax: small companies are now exempted from education tax.



Unclaimed Dividends of public companies: In addition to the provisions of CAMA relating to dividends which remain unclaimed for a period of 12 years, the Finance Act now specifically provides that the unclaimed dividends of a public company quoted on the NSE for a period of 6 years shall be transferred to an Unclaimed Funds Trust Fund. This fund is held in trust by the Federal Government as a special debt owed to the shareholders, and may be claimed by the shareholder at any time.


Filing of returns: companies doing business in the free trade zones are now required to file self-assessment returns to the Federal Inland Revenue Service or face punitive sanctions for non-compliance.


Excise duties on telecommunication services: telecommunication services provided in Nigeria will now attract excise duties at the rate prescribed by the President.



As much as the efforts of the Nigerian government to provide a comprehensive update of the applicable tax laws and related legislations through the Finance Act 2020 is applaudable, one cannot deny that there is an apparent need for a timeous follow-up on some of these provisions with the relevant Orders to ensure that the essence of the amendments is not lost. A vivid example of this is the definition of “Significant Economic Presence” applicable to non-resident individuals for profits derived from Nigeria.

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